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Question
Q. Consider the following statements in reference to the AT-1 Bonds (Additional Tier-1 bonds)?
Which of the statements given above is/are correct?
Q. Consider the following statements in reference to the AT-1 Bonds (Additional Tier-1 bonds)?
Which of the statements given above is/are correct?
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Solution
The correct option is A 1 only
Explanation:
- Statement 1 is correct. AT-1 Bonds are a type of unsecured bonds that banks issue to shore up their core capital base to meet the Basel-III norms. Basel III Norms are an international regulatory accord that has introduced a set of reforms, ensuring the improvement in regulation and supervision in the banking sector. According to Basel-III norms banks’ regulatory capital is divided into Tier 1 and Tier 2, while Tier 1 is subdivided into Common Equity Tier-1 (CET-1) and Additional Tier-1 (AT-1) capital.
- Statement 2 is incorrect. AT-1 bonds have no maturity date and hence they are also called perpetual bonds. AT- 1 bonds are like any other bond issued by a bank and they pay a fixed rate of interest at regular intervals.
Explanation:
- Statement 1 is correct. AT-1 Bonds are a type of unsecured bonds that banks issue to shore up their core capital base to meet the Basel-III norms. Basel III Norms are an international regulatory accord that has introduced a set of reforms, ensuring the improvement in regulation and supervision in the banking sector. According to Basel-III norms banks’ regulatory capital is divided into Tier 1 and Tier 2, while Tier 1 is subdivided into Common Equity Tier-1 (CET-1) and Additional Tier-1 (AT-1) capital.
- Statement 2 is incorrect. AT-1 bonds have no maturity date and hence they are also called perpetual bonds. AT- 1 bonds are like any other bond issued by a bank and they pay a fixed rate of interest at regular intervals.
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